Overview

Bed Bath & Beyond Inc. and subsidiaries (the "Company") is an omnichannel retailer that makes it easy for its customers to feel at home. The Company sells a wide assortment of merchandise in the Home, Baby, Beauty and Wellness markets and operates under the names Bed Bath & Beyond ("BBB"), Harmon, Harmon Face Values, or Face Values (collectively, "Harmon"), and buybuy BABY ("Baby"). In December 2020, subsequent to the end of the third quarter of fiscal 2020, the Company entered into a definitive agreement to sell its Cost Plus World Market retail banner, which is expected to be completed by the end of fiscal 2020, subject to customary closing conditions. Customers can purchase products either in-store, online, with a mobile device or through a customer contact center. The Company generally has the ability to have customer purchases picked up in-store, curbside or shipped direct to the customer from the Company's distribution facilities, stores or vendors. The Company also operates Decorist, an online interior design platform that provides personalized home design services. In addition, the Company is a partner in a joint venture which operates retail stores in Mexico under the name Bed Bath & Beyond.

The Company has accounted for its operations as two operating segments: North American Retail and Institutional Sales, which did not meet the quantitative thresholds under GAAP and, therefore, was not a reportable segment. The Institutional Sales operating segment was comprised of Linen Holdings, which was divested in October 2020.

The Company has undertaken significant changes over the past year, including extensive changes to its Board of Directors and executive leadership, as well as development of essential strategies and plans to focus on and grow its core Home, Baby, Beauty and Wellness businesses for long-term success. In recent months, as the world responds to the unparalleled challenge of the COVID-19 pandemic, the Company has taken aggressive and thoughtful steps to safeguard its people and communities while it continues to serve customers. As it did with many other businesses, the COVID-19 pandemic served as a catalyst to accelerate the pace of change and innovation across the Company, advancing ongoing efforts to reset the Company's cost structure and build a modern, durable model for long-term profitable growth.



As part of its business transformation plan, the Company is pursuing a
comprehensive cost restructuring program, to drive profit improvement over the
next two-to-three years. The Company expects to reinvest a portion of the
expected cost savings into future growth initiatives. Key components of the
expected profit improvement include:
•Approximately $100 million in annual savings from its previously disclosed
store network optimization project which includes the planned closure of
approximately 200 mostly Bed Bath & Beyond stores over the next two years.
During the third quarter of fiscal 2020, the Company initiated store closing
activities for more than 70 Bed Bath & Beyond stores and expects to close
approximately 120 Bed Bath & Beyond stores by the end of fiscal 2020. The
Company continues to believe that its physical store channel is an asset for its
transformation into a digital-first company, especially with new
omni-fulfillment capabilities in Buy-Online-Pick-Up-In-Store (BOPIS), Curbside
Pickup and Same Day Delivery;
•Approximately $200 million in annual savings from product sourcing, through
renegotiations with existing vendors; and
•Approximately $100 to $150 million in annual selling, general and
administrative expense savings from continued optimization of its corporate
overhead cost structure and reductions in other discretionary expense. During
the second quarter of fiscal 2020, the Company implemented a workforce reduction
of approximately 2,800 roles from across its corporate headquarters and retail
stores, designed to further reduce layers at the corporate level, significantly
reposition field operations to better serve customers in a digital-first
environment, and realign technology, supply chain and merchandising teams to
support the Company's strategic growth initiatives.
In connection with the above restructuring and transformation initiatives, the
Company recorded $30.7 million and $61.6 million, respectively, within cost of
sales and restructuring and transformation initiative expenses in its
consolidated statements of operations for the three and nine months ended
November 28, 2020 for costs associated with its planned store closures as part
of the network optimization plan for which the store closure process has
commenced, workforce reduction and other transformation initiatives. At this
point, the Company is unable to estimate the amount or range of amounts expected
to be incurred in connection with future store closures and will provide such
estimates as they become available.

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On October 28, 2020, the Company held its first Investor Day to unveil the
details of a comprehensive strategy designed to unlock growth and drive
significant shareholder value as it rebuilds authority in the Home, Baby and
Beauty & Wellness markets. This strategy includes resetting its assortment, and
providing a more curated, inspirational and differentiated product collection
across categories; offering a clear and compelling price-value proposition
designed to increase relevance with customers while at the same time driving
productivity and cost savings; leveraging its stores as a strategic asset that
deliver fast and convenient shopping for its digital-first customers; and
modernizing operational proficiencies in an effort to deliver a
technology-powered foundation to support sustainable growth, improved margins
and greater cash generation.
On December 14, 2020, the Company announced that it entered into a definitive
agreement to sell Cost Plus World Market to Kingswood Capital Management, a Los
Angeles-based private equity firm, for $110 million, subject to certain working
capital and other adjustments. The transaction is expected to close during the
fourth quarter of fiscal 2020, subject to customary closing conditions. At
November 28, 2020, certain assets and liabilities related to Cost Plus World
Market were classified as held for sale on the Company's consolidated balance
sheet.
On October 11, 2020, the Company entered into a definitive agreements to sell
Christmas Tree Shops ("CTS") to Handil Holdings LLC and to sell one of the CTS
distribution facilities to an institutional buyer, with a leaseback term of nine
months, to provide business continuity to the Company for some of its operations
currently using the facility. These transactions were completed during the third
quarter of fiscal 2020, generating approximately $233.8 million in proceeds,
subject to certain working capital and other adjustments.
On October 11, 2020, the Company entered into a definitive agreement to sell
Linen Holdings to The Linen Group, LLC, an affiliate of Lion Equity Partners. On
October 24, 2020, the Company completed the sale of Linen Holdings for
approximately $11.9 million, subject to certain working capital and other
adjustments.
On February 14, 2020, the Company entered into a definitive agreement to sell
PersonalizationMall.com ("PMall") to 1-800-FLOWERS.COM for $252 million, subject
to certain working capital and other adjustments. The buyer was required to
close the PMall transaction on March 30, 2020, but failed to do so. Accordingly,
the Company filed an action to require the buyer to close the transaction.  On
July 20, 2020, the Company entered into a settlement agreement with respect to
the litigation. Under this agreement, 1-800-FLOWERS.COM agreed to move forward
with its purchase of PMall for $245 million, subject to certain working capital
and other adjustments. The transaction closed on August 3, 2020. During the
first quarter of fiscal 2020, the Company also sold One Kings Lane to a third
party for an amount that was not material.
The net proceeds from these transactions and any other potential cash-generating
transactions could be used to reinvest in the Company's core business operations
to drive growth, fund share repurchases, reduce the Company's outstanding debt,
or some combination of these.
The integration of retail store and digital channels allows the Company to
provide its customers with a seamless omni channel shopping experience. Store
purchases are primarily fulfilled from that store's inventory or may also be
shipped to a customer from one of the Company's distribution facilities, from a
vendor, or from another store. Other purchases, including web and mobile, can be
shipped to a customer from the Company's distribution facilities, directly from
vendors, or from a store. Customers can also choose to pick up orders using the
Company's newly introduced BOPIS and contactless Curbside Pickup services, as
well as return online purchases to a store. Customers can also make purchases
through one of the Company's customer contact centers and in-store through The
Beyond Store, the Company's proprietary web-based platform. These capabilities
allow the Company to better serve customers across various channels.
Operating in the highly competitive retail industry, the Company's performance,
along with other retail companies, is influenced by a number of factors
including, but not limited to: general economic conditions including the housing
market, unemployment levels and commodity prices; the overall macroeconomic
environment and related changes in the retailing environment; consumer
preferences, spending habits and adoption of new technologies; unusual weather
patterns and natural disasters, including pandemics; competition from existing
and potential competitors across all channels; potential supply chain
disruption; the ability to find suitable locations at acceptable occupancy costs
and other terms to support the Company's plans for new stores; and the ability
to assess and implement technologies in support of the Company's development of
its omnichannel capabilities. The Company cannot predict whether, when or the
manner in which these factors could affect the Company's operating results.
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In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The pandemic has materially disrupted the operations of the Company to date. The consequences of the pandemic and impact to the economy continue to evolve and the full extent of the impact is still uncertain. As a result of 'social distancing' measures put into effect in March 2020, the Company began to temporarily close certain store locations that did not have a health and personal care department and, as of March 23, 2020, all retail banner stores across the U.S .and Canada were temporarily closed except for most stand-alone Baby and Harmon stores, subject to state and local regulations. In May 2020, the Company announced a phased approach to re-open its stores, subject to state and local regulations. As of the end of July 2020, nearly all of the Company's stores had re-opened, in accordance with state and local regulations. The Company cannot predict, however, whether reopened stores will remain open, particularly if the pandemic's effects increase over the winter season. In addition, the Company expanded its recently rolled out BOPIS, contactless Curbside Pickup and Same Day Delivery services to cover the vast majority of stores. In conjunction with the temporary store closures, the Company implemented additional cost reductions, including a furlough of the majority of store associates and a portion of corporate associates. The Company provided impacted store associates with applicable pay and benefits through April 3, 2020, and impacted corporate associates with pay and benefits through April 18, 2020. In addition, the Company had continued to pay 100% of the cost of healthcare premiums for all associates who participated in the Company's health plan. Nearly all of the associates who were subject to furlough have returned as of November 28, 2020. The Company also implemented a temporary reduction in salaries of the Company's executive team by 30% through May 16, 2020, and a temporary reduction in the quarterly cash compensation of the independent members of the Board of Directors by 30% for the fiscal 2020 first quarter. The Company also modified its fiscal 2020 capital investments, focusing on its core business and key projects that support its digital and omni fulfillment capabilities, including the introduction of BOPIS and contactless Curbside Pickup services, omni inventory management, and digital marketing and personalization.

The Company has and will continue to seek opportunities to mitigate the impact of the COVID-19 pandemic, including, among others, renegotiating payment terms for goods, services and rent, managing inventory levels, and reducing discretionary spending such as business travel and advertising and expense associated with the maintenance of stores that were temporarily closed. The COVID-19 pandemic materially adversely impacted the Company's results of operations and cash flows in fiscal 2020 to date, and could continue to materially impact results of operations and cash flows as well as the Company's financial condition. Given the uncertainties regarding the spread of the virus, the timing of the economic recovery and the resurgence of the virus, the related financial impact cannot be reasonably predicted or estimated at this time. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in the United States. The CARES Act is an emergency economic aid package to help mitigate the impact of the COVID-19 pandemic. Among other things, the CARES Act provides certain changes to tax laws, which may impact the Company's results of operations, financial position and cash flows. The Company is currently implementing certain provisions of the CARES Act, such as deferring employer payroll taxes and utilizing the ability to carry back and deduct losses to offset prior income in previously filed tax returns. As of November 28, 2020, the Company has deferred $35.9 million of employer payroll taxes, of which 50% are required to be deposited by December 2021 and the remaining 50% by December 2022. During the nine months ended November 28, 2020, the Company recorded an additional $43.7 million benefit as a result of the fiscal 2019 net operating losses that can now be carried back to prior years during which the federal tax rate was 35% under the CARES Act. In addition, the Company recorded a credit of $28.3 million as an offset to selling, general and administrative expenses as a result of the employee retention credits made available under the CARES Act for U.S. employees and under the Canada Emergency Wage Subsidy for Canadian employees during the nine months ended November 28, 2020.

The following represents an overview of the Company's financial performance for the periods indicated:

•Net sales for the three months ended November 28, 2020 were $2.618 billion, a decrease of approximately 5.1% as compared with the three months ended November 30, 2019. Net sales for the nine months ended November 28, 2020 were $6.614 billion, a decrease of approximately 17.9% as compared with the nine months ended November 30, 2019. As noted above, the majority of the Company's stores were closed beginning March 23, 2020, except for most stand-alone Baby and Harmon stores, which remained open during such period, subject to state and local regulations, through July 2020. Nearly all stores reopened as of July 2020. The decline in net sales for the three and nine months ended November 28, 2020 also reflected the business divestitures described above. •Net sales consummated through digital channels increased approximately 75% and 82%, respectively, and net sales consummated in-store declined approximately 17.0% and 37.0%, respectively, for the three and nine months ended November 28, 2020. Net sales consummated through digital channels represented approximately one third the Company's net sales for the three and nine months ended November 28, 2020, respectively.


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?Comparable sales for the three months ended November 28, 2020 increased by
approximately 2.4%, compared to a decrease of approximately 8.3% for the three
months ended November 30, 2019. As a result of the extended closure of the
majority of the Company's stores due to the COVID-19 pandemic and the Company's
policy of excluding extended store closures from its comparable sales
calculation, the Company believes that comparable sales were not a meaningful
metric for the first quarter of fiscal 2020 and, therefore, are not a meaningful
metric for the nine months ended November 28, 2020. For the nine months ended
November 30, 2019, comparable sales decreased by approximately 7.2%.
Comparable sales include sales consummated through all retail channels which
have been operating for twelve full months following the opening period
(typically four to six weeks). The Company is an omnichannel retailer with
capabilities that allow a customer to use more than one channel when making a
purchase, including in-store, online, with a mobile device or through a customer
contact center, and have it fulfilled, in most cases, either through in-store
customer pickup or by direct shipment to the customer from one of the Company's
distribution facilities, stores or vendors.
Sales consummated on a mobile device while physically in a store location and
BOPIS orders are recorded as customer facing digital channel sales. Customer
orders taken in-store by an associate through The Beyond Store, the Company's
proprietary, web-based platform, are recorded as in-store sales. Prior to the
Company implementing BOPIS and contactless Curbside Pickup services, customer
orders reserved online and picked up in a store were recorded as in-store sales.
Sales originally consummated from customer facing digital channels and
subsequently returned in-store are recorded as a reduction of in-store sales.
Stores relocated or expanded are excluded from comparable sales if the change in
square footage would cause meaningful disparity in sales over the prior period.
In the case of a store to be closed, such store's sales are not considered
comparable once the store closing process has commenced. Stores impacted by
unusual and unexpected events outside the Company's control, including the
COVID-19 pandemic, severe weather, fire or floods, are excluded from comparable
sales for the period of time that such event would cause a meaningful disparity
in sales over the prior period. One Kings Lane and PMall are excluded from the
comparable sales calculation beginning in the second quarter of fiscal 2020 due
to their divestiture and Christmas Tree Shops is excluded from the comparable
sales calculation beginning in fiscal November of 2020 due to its divestiture.
Linen Holdings has always been excluded from the comparable sales calculation,
as it represents non-retail activity.
•Gross profit for the three months ended November 28, 2020 was $956.6 million,
or 36.5% of net sales, compared with $913.8 million, or 33.1% of net sales, for
the three months ended November 30, 2019. Gross profit for the nine months ended
November 28, 2020 was $2.293 billion, or 34.7% of net sales, compared with
$2.528 billion, or 31.4% of net sales, for the nine months ended November 30,
2019. The Company's gross profit margin in the three and nine months ended
November 28, 2020 includes a net benefit of approximately $30.4 million and
$53.4 million, respectively, from the reduction of incremental markdown reserves
taken in the prior year, partially offset by an increase for restructuring and
transformation initiatives. The Company's gross profit margin in the prior year
reflected an incremental reserve for future markdowns of approximately
$169.8 million related to the Company's transformation initiatives, which was an
incremental charge to the actual markdowns recorded in the second and third
quarters of fiscal 2019.
•Selling, general and administrative expenses ("SG&A") for the three months
ended November 28, 2020 were $890.7 million, or 34.0% of net sales, compared
with $931.8 million, or 33.8% of net sales, for the three months ended November
30, 2019. SG&A for the nine months ended November 28, 2020 were $2.461 billion,
or 37.2% of net sales, compared with $2.705 billion, or 33.6% of net sales, for
the nine months ended November 30, 2019.
•Impairments, including on assets held for sale, for the three and nine months
ended November 28, 2020 were $58.0 million or 2.2% of net sales, and $172.4
million or 2.6% of net sales, respectively, which included a loss on business
held for sale of $54.0 million to remeasure Cost Plus to the lower of its
carrying value or fair value less costs to sell. Impairment charges for the
three and nine months ended November 30, 2019 were $11.8 million, or 0.4% of net
sales and $441.4 million or 5.5% of net sales, respectively.
•Restructuring and transformation expenses during the three and nine months
ended November 28, 2020 were $16.8 million and $47.6 million, respectively,
primarily related to severance costs recorded in connection with the workforce
reduction and store network optimization programs described above, as well as
other restructuring activities.
•Loss (gain) on sale of business included a $113.9 million loss for the three
months ended November 28, 2020 and a $75.6 million gain for the nine months
ended November 28, 2020, which included losses on the sales of Linen Holdings
and CTS during the third quarter of fiscal 2020 and a gain on the sale of PMall
during the second quarter of 2020.
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•Interest expense, net for the three and nine months ended November 28, 2020 was
$17.8 million and $58.3 million, respectively, compared with $17.2 million and
$49.4 million, respectively, for the three and nine months ended November 30,
2019.
•Gain on extinguishment of debt for the nine months ended November 28, 2020 of
$77.0 million related to partial repayment of senior unsecured notes in August
2020.
•The effective tax rate for the three and nine months ended November 28, 2020
was 46.4% and 45.7%, respectively, as compared with 17.9% for both the three and
nine months ended November 30, 2019. For the three and nine months ended
November 28, 2020, the effective tax rate includes the impact of the benefits
relating to the sales CTS and Linen Holdings and relating to the loss on Cost
Plus that is classified as held-for sale, partially offset by the impact of
impairment charges for tradename and certain store-level assets, and other
discrete tax items. The effective tax rate for the nine months ended November
28, 2020 also includes a $43.7 million benefit related to fiscal 2019 net
operating loss carry-back under the CARES Act, as described above, and the gain
on sale of PMall. For the three and nine months ended November 30, 2019, the
effective tax rate reflects the impact of charges for goodwill and other
impairments and severance costs, portions of which are non-deductible for tax
purposes, and other discrete tax items resulting in net after tax costs of
approximately $3.5 million and $10.5 million, respectively.
•For the three months ended November 28, 2020, net loss per diluted share was
$(0.61) ($(75.4) million), as compared with net loss per diluted share of
$(0.31) ($(38.6) million) for three months ended November 30, 2019. The
unfavorable change in net loss per diluted share for the three months ended
November 28, 2020 was due to higher net loss due to the items described above
and the impact of the Company's repurchases of common stock. Net loss per
diluted share for the three months ended November 28, 2020 was unfavorably
impacted by $0.69 per share, attributable to the net loss on sale of businesses,
charges recorded in connection with the restructuring and transformation
initiatives, and non-cash impairment charges related to a business held for
sale, tradename and certain store-level assets, partially offset by a benefit
from the reduction of non-recurring inventory reserves. Net loss per diluted
share for the three months ended November 30, 2019 included a net benefit of
approximately $0.07 per diluted share from the favorable impact from an
adjustment to the incremental inventory reserve for future markdowns related to
the Company's transformation initiatives, partially offset by a non-cash charge
for the impairment of certain store-level assets incurred during the fiscal
third quarter of 2019.
For the nine months ended November 28, 2020, net loss per diluted share was
$(1.29) ($(159.8) million), as compared with net loss per diluted share of
$(4.40) ($(548.4) million) for the nine months ended November 30, 2019. The
favorable change in net loss per diluted share for the nine months ended
November 28, 2020 reflected the improvement in earnings due to the items
described above and the impact of the Company's repurchases of common stock. Net
loss per diluted share for the nine months ended November 28, 2020 includes the
net favorable impact of $0.09 per share related to the net gain on sale of
businesses, gain on partial extinguishment of debt and a benefit from the
reduction of non-recurring inventory reserves, partially offset by non-cash
impairment charges related to a business held for sale, tradename and certain
store-level assets and charges recorded in connection with the restructuring and
transformation initiatives. Net loss per diluted share for the nine months ended
November 30, 2019 included the unfavorable impact of $4.48 per diluted share
during the nine months ended November 30, 2019 related to goodwill and other
impairment charges, including non-cash store impairment charges, an incremental
reserve for future markdowns related to the Company's transformation
initiatives, severance costs and shareholder activity costs.
Capital expenditures for the nine months ended November 28, 2020 and
November 30, 2019 were $117.3 million and $188.4 million, respectively. In the
first nine months of fiscal 2020, approximately 65% of the capital expenditures
related to pre-planned technology projects, including inventory and warehouse
management capabilities such as advanced allocation logic and replenishment
strategies to meet changing customer needs. The remaining capital expenditures
were primarily related to investments in existing stores.

The Company continues to review and prioritize its capital needs and remains committed to making the required investments in its infrastructure to help position the Company for continued growth and success. Key areas of investment include: continuing to improve the presentation and content as well as the functionality, general search and navigation across its customer facing digital channels; improving customer data integration and customer relations management capabilities; continuing to enhance service offerings to its customers; continuing to strengthen and deepen its information technology, analytics, marketing and e-commerce groups; and creating more flexible fulfillment options designed to improve the Company's delivery capabilities and lower the Company's shipping costs. These and other investments are expected to, among other things, provide a seamless and compelling customer experience across the Company's omnichannel retail platform. As a result of the COVID-19 pandemic, the Company is prioritizing essential capital expenditures for fiscal 2020 to drive strategic growth plans, including investments in digital, BOPIS and Curbside Pickup service offerings, and has postponed certain previously planned capital expenditures, including some store remodels.


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During the nine months ended November 28, 2020, the Company opened a total of
five new stores and closed 30 stores. The Company plans to continue to actively
manage its real estate portfolio in order to permit store sizes, layouts,
locations and offerings to evolve over time to optimize market profitability and
will renovate or reposition stores within markets when appropriate. Over the
past several years, the Company's pace of its store openings has slowed, and the
Company has increased the number of store closings. The Company has
approximately 150 store leases that are up for renewal in the remainder of 2020,
which provide opportunity to evaluate additional store closures and relocations.
Some portion of these stores will be included in the Company's store network
optimization program discussed above.
During fiscal 2016, the Company's Board of Directors authorized a quarterly
dividend program. During the nine months ended November 28, 2020 and
November 30, 2019, total cash dividends of $23.1 million and $64.3 million were
paid, respectively. In March 2020, the Company suspended its future quarterly
declarations of cash dividends as a result of the COVID-19 pandemic. Any future
quarterly cash dividend payments on its common stock will be subject to the
determination by the Board of Directors, based on an evaluation of the Company's
earnings, financial condition and requirements, business conditions and other
factors, including the restrictions on the payment of dividends under the
secured asset-based revolving credit facility (see "Long Term Debt," Note 11).
On October 28, 2020, the Company entered into an accelerated share repurchase
agreement ("ASR Agreement") with JPMorgan Chase Bank, National Association ("JP
Morgan") to repurchase $225.0 million of the Company's common stock. Pursuant to
the ASR Agreement, the Company paid $225.0 million to JP Morgan and received an
initial delivery of 4.5 million shares of common stock, which was accounted for
as a treasury stock transaction and resulted in a $92.4 million increase in
treasury stock and reduced the number of weighted average shares outstanding.
The final number of shares to be repurchased under the ASR Agreement will be
based on the average of the daily volume-weighted average price of common stock
during the term of the ASR Agreement, less a discount. The Company also recorded
a $132.6 million decrease in additional paid in capital upon the inception of
the ASR Agreement. At final settlement, which is expected to occur during the
Company's fiscal 2020 fourth quarter ending on February 27, 2021, JP Morgan may
be required to deliver additional shares of common stock to the Company or,
under certain circumstances, the Company may elect to either deliver shares or
make a cash payment to JP Morgan. Subsequent to the end of the fiscal third
quarter of 2020, on December 11, 2020, the Company's Board of Directors approved
a new accelerated share repurchase program to repurchase an aggregate of $150
million of the Company's common stock, subject to market conditions, which is in
addition to the $225.0 million accelerated share repurchase program announced in
the third quarter of fiscal 2020, both of which are expected to be completed by
the end of fiscal 2020. The Company also expanded its existing share repurchase
authorization by an additional $150 million, which increased the total share
repurchase authorization to $12.775 billion.
In addition, during the three and nine months ended November 28, 2020, the
Company repurchased approximately 0.1 million shares and 0.6 million shares,
respectively, of its common stock to cover employee related taxes withheld on
vested restricted stock, restricted stock units and performance stock unit
awards, at a total cost of approximately $1.7 million and $4.7 million,
respectively, bringing the aggregate total of common stock repurchased to
approximately 222.3 million shares for a total cost of approximately $10.8
billion since the initial authorization in December 2004. During the three and
nine months ended November 30, 2019, the Company repurchased approximately 0.1
million and 6.8 million shares, respectively, of its common stock at a total
cost of approximately $1.2 million and $99.1 million, respectively.
Decisions regarding share repurchases are within the discretion of the Board of
Directors, and will be influenced by a number of factors, including the price of
the Company's common stock, general business and economic conditions, the
Company's financial condition and operating results, the emergence of
alternative investment or acquisition opportunities, changes in business
strategy and other factors. The Company's share repurchase program could change,
and would be influenced by several factors, including business and market
conditions, such as the impact of the COVID-19 pandemic on the Company's stock
price. The Company reviews its alternatives with respect to its capital
structure on an ongoing basis. Any future share repurchases will be subject to
the determination of the Board of Directors, based on an evaluation of the
Company's earnings, financial condition and requirements, business conditions
and other factors, including the restrictions on share repurchases under the
secured asset-based revolving credit facility (see "Long Term Debt," Note 11 to
the accompanying consolidated financial statements).

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Results of Operations
Net Sales
Net sales for the three months ended November 28, 2020 were $2.618 billion, a
decrease of $140.9 million or approximately 5.1%, compared to $2.759 billion of
net sales for the corresponding quarter last year. Net sales for the nine months
ended November 28, 2020 were $6.614 billion, a decrease of $1.4 billion, or
approximately 17.9%, compared to net sales of $8.052 billion for the
corresponding nine months last year. The decrease in net sales for the nine
months ended November 28, 2020 was primarily due to the temporary nationwide
closure of the majority of the Company's stores beginning March 23, 2020 due to
the COVID-19 pandemic, except for most stand-alone Baby and Harmon stores, which
remained open during such period, subject to state and local regulations. Nearly
all of the Company's stores have reopened as of July 2020. The declines in net
sales during the third quarter and year-to-date period also reflected the
impacts of business divestitures described above. Net sales consummated through
digital channels increased approximately 75% and 82%, respectively, and net
sales consummated in-store declined approximately 17% and 37%, respectively,
during the three and nine months ended November 28, 2020. Net sales consummated
through digital channels represented approximately one third of the Company's
net sales for the three and nine months ended November 28, 2020.
Comparable sales for the three months ended November 28, 2020 increased by
approximately 2.4%, compared to a decrease of approximately 8.3% for the three
months ended November 30, 2019. The increase in comparable sales for the three
months ended November 28, 2020 was due to an increase in the average transaction
amount, partially offset by a decrease in the number of transactions.
As a result of the extended closure of the majority of the Company's stores due
to the COVID-19 pandemic and the Company's policy of excluding extended store
closures from its comparable sales calculation, the Company believes that
comparable sales were not a meaningful metric for the first quarter of fiscal
2020 and, therefore, are not a meaningful metric for the nine months ended
November 28, 2020. For the nine months ended November 30, 2019, comparable sales
decreased by approximately 7.2%.
The Company's comparable sales metric considers sales consummated through all
retail channels - in-store, online, with a mobile device or through a customer
contact center. The Company's omnichannel environment allows its customers to
use more than one channel when making a purchase. The Company believes in an
integrated and seamless customer experience. A few examples are: a customer may
be assisted by an in-store associate to create a wedding or baby registry, while
the guests may ultimately purchase a gift from the Company's websites; or a
customer may research a particular item, and read other customer reviews on the
Company's websites before visiting a store to consummate the actual purchase; or
a customer may buy an item online for in-store or curbside pickup; or while in a
store, a customer may make the purchase on a mobile device for in home delivery
from either a distribution facility, a store or directly from a vendor. In
addition, the Company accepts returns in-store without regard to the channel in
which the purchase was consummated, therefore resulting in reducing store sales
by sales originally consummated through customer facing digital channels. As the
Company's retail operations are integrated and it cannot reasonably track the
channel in which the ultimate sale is initiated, the Company can however,
provide directional information on where the sale was consummated.
Domestics merchandise includes categories such as bed linens and related items,
bath items and kitchen textiles. Home furnishings include categories such as
kitchen and tabletop items, fine tabletop, basic housewares, general home
furnishings (including furniture and wall décor), consumables and certain
juvenile products. Sales of domestics merchandise and home furnishings accounted
for approximately 35.7% and 64.3% of net sales, respectively, for the three
months ended November 28, 2020, and approximately 35.0% and 65.0% of net sales,
respectively, for the three months ended November 30, 2019. Sales of domestics
merchandise and home furnishings accounted for approximately 35.4% and 64.6% of
net sales, respectively, for the nine months ended November 28, 2020 and
approximately 36.4% and 63.6% of net sales, respectively, for the nine months
ended November 30, 2019.
Gross Profit
Gross profit for the three months ended November 28, 2020 was $956.6 million, or
36.5% of net sales, compared with $913.8 million, or 33.1% of net sales, for the
three months ended November 30, 2019. Gross profit for the nine months ended
November 28, 2020 was $2.293 billion, or 34.7% of net sales, compared with
$2.528 billion, or 31.4% of net sales, for the nine months ended November 30,
2019. The increase in gross profit margin as a percentage of net sales for the
three and nine months ended November 28, 2020 was primarily attributable to an
increase in product mix, including lower coupon expense and the leverage of
distribution and fulfillment costs, partially offset by the impact of channel
mix, including higher net-direct-to-customer shipping expense. In addition, the
Company's gross profit margin for the three and nine months ended November 28,
2020 includes a net benefit of approximately $30.4 million and $53.4 million,
respectively, from the reduction of incremental markdown reserves taken in the
prior year, partially offset by an increase for restructuring and transformation
initiatives. The Company's gross profit margin in the prior year reflected an
incremental reserve for future markdowns of
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approximately $169.8 million related to the Company's transformation
initiatives, which was an incremental charge to the actual markdowns recorded in
the second and third quarters of fiscal 2019.
In addition, the Company's cost of sales includes cost of merchandise, buying
costs and costs of the Company's distribution network, including inbound freight
charges, distribution facility costs, receiving costs, internal transfer costs
and shipping and handling costs. During the first quarter of fiscal 2020, the
Company reevaluated the costs included in cost of sales as it continues its
focus on its digital and omni fulfillment capabilities, including the
introduction of BOPIS and contactless Curbside Pickup services. The reevaluation
of the costs included in cost of sales favorably impacted the change in gross
profit margin as a percentage of net sales by approximately 150 basis points and
200 basis points, respectively, during the three and nine months ended November
28, 2020. This favorable impact was fully offset by a corresponding unfavorable
impact in the change in SG&A as a percentage of net sales and resulted in no net
impact to the consolidated statement of operations.
Selling, General and Administrative Expenses
SG&A for the three months ended November 28, 2020 was $890.7 million, or 34.0%
of net sales, compared with $931.8 million, or 33.8% of net sales, for the three
months ended November 30, 2019. The slight increase in SG&A as a percentage of
net sales was primarily due to increased occupancy costs (primarily rent),
largely offset by lower advertising expenses and payroll and related expenses.
SG&A for the nine months ended November 28, 2020 was $2.461 billion, or 37.2% of
net sales, compared with $2.705 billion, or 33.6% of net sales, for the nine
months ended November 30, 2019. The increase in SG&A as a percentage of net
sales was primarily attributable to increases in fixed costs such as rent and
occupancy and depreciation, and increased consulting costs related to the
Company's strategic initiatives.
Impairments, Including On Assets Held for Sale
Impairments, including on assets held for sale for the three and nine months
ended November 28, 2020, were $58.0 million, or 2.2% of net sales, and $172.4
million, or 2.6% of net sales, respectively, compared with $11.8 million,
or 0.4% of net sales and $441.4 million, or 5.5% of net sales, respectively,
during the comparable periods last year. During the third quarter of fiscal
2020, the Company recorded a loss on business held for sale of $54.0 million to
remeasure Cost Plus to the lower of its carrying value or fair value less costs
to sell. Impairment charges for the three months and nine months ended November
28, 2020 also included $1.6 million and $84.0 million, respectively, relating to
certain store-level assets (including leasehold improvements and operating lease
assets) and tradename impairments of $2.4 million and $35.1 million,
respectively.
Impairment charges for the nine months ended November 30, 2019 included goodwill
impairments of $391.1 million, tradename impairments of $10.2 million and
certain store-level and operating lease asset impairments of $40.1 million. The
non-cash pre-tax goodwill impairment charges recorded during the first half of
fiscal 2019 were primarily the result of a sustained decline in the Company's
market capitalization.
Restructuring and Transformation Initiative Expenses
During the three and nine months ended November 28, 2020, the Company recorded
charges of $16.8 million and $47.6 million. respectively, in connection with its
restructuring and transformation initiatives, primarily related to severance
costs recorded in connection with the workforce reduction and store network
optimization programs described above as well as other restructuring activities.
(see "Restructuring Activities," Note 16 to the accompanying financial
statements).
Loss (gain) on Sale of Business
During the three and nine months ended November 28, 2020, the Company recorded a
$113.9 million net loss and a $75.6 million gain on sale of businesses,
respectively, which reflected the $189.5 million gain in connection with the
sale of PMall in the second quarter of fiscal 2020, as well as losses on
divestitures of Linen Holdings and CTS of $62.8 million and $51.1 million,
respectively, recorded during the third quarter of fiscal 2020 (see "Assets Held
for Sale and Divestitures," Note 17 to the accompanying financial statements).
Operating Loss
Operating loss for the three months ended November 28, 2020 was $122.8 million,
or 4.7% of net sales, compared with an operating loss of $29.8 million, or 1.1%
of net sales, during the comparable period last year. The unfavorable change in
operating loss as a percentage of net sales for the three months ended November
28, 2020 was primarily attributable to third quarter losses on the divestitures
of Linen Holdings and CTS, the charge related to classification of Cost Plus as
held for sale, and restructuring and transformation initiative expenses,
partially offset by an increase in gross profit margin.
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For the nine months ended November 28, 2020, operating loss was $313.2 million,
or 4.7% of net sales, compared with an operating loss of $618.9 million, or 7.7%
of net sales for the nine months ended November 30, 2019. The favorable change
in operating loss as a percentage of net sales for the nine months ended
November 28, 2020 was primarily due to an increase in the gross margin, lower
goodwill and other impairments compared to the prior year period, and the net
gain on sales of businesses in the current year, partially offset by increased
SG&A expenses and restructuring and transformation initiative expenses. The
current year reductions of net sales reflected the impact of the temporary
nationwide closure of the majority of the Company's stores due to COVID-19,
nearly all of which have reopened as of July 2020, as well as the impact of the
divestitures.
Interest Expense, net
Interest expense, net for the three and nine months ended November 28, 2020 was
$17.8 million and $58.3 million, respectively, as compared to $17.2 million and
$49.4 million, respectively, for the three and nine months ended November 30,
2019. For the three months ended November 28, 2020, the increase in interest
expense was primarily due to lower interest income on investments, largely
offset by lower interest expense primarily attributable to the repurchase of a
portion of the senior unsecured notes in August 2020. For the nine months ended
November 28, 2020 the increase in interest expense, net was primarily driven by
lower interest income on investments and increased interest costs attributable
to the Company's revolving credit facilities, primarily relating to the new ABL
Facility.
Gain on Extinguishment of Debt
During the nine months ended November 28, 2020, the Company recorded a $77.0
million gain on the repurchase of $75 million principal amount of 4.915% senior
unsecured notes due August 1, 2034 and $225 million principal of 5.165% senior
unsecured notes due August 1, 2044 (see "Long Term Debt," Note 11 to the
accompanying financial statements).
Income Taxes
The effective tax rate for the three months ended November 28, 2020 was 46.4%,
compared with 17.9% for the three months ended November 30, 2019. The effective
tax rate for the three months ended November 28, 2020 reflects the Company's
expectation to carry back the net operating loss to a year in which the tax rate
was 35%, and includes the impact of the benefit on the losses from the
divestiture of CTS and Linen Holdings entities and the loss related to the Cost
Plus business classified as held for sale, partially offset by the impact of
impairment charges for tradename and certain store-level assets, and other
discrete tax items resulting in net after tax costs, while the tax rate for the
three months ended November 30, 2019 included net after tax costs of
approximately $3.5 million due to discrete federal and state tax items.
The effective tax rate for the nine months ended November 28, 2020 was 45.7%,
compared with 17.9% for the nine months ended November 30, 2019. For the nine
months ended November 28, 2020, the effective tax rate reflects the Company's
expectation to carry back the net operating loss to a year in which the tax rate
was 35%, and includes the impact of the benefit on the losses from the
divestiture of CTS and Linen Holdings and the loss related to Cost Plus
classified as held for sale, partially offset by the impact of impairment
charges for tradename and certain store-level assets, the gain on sale of PMall,
a $43.7 million benefit related to fiscal 2019 net operating loss carry-back
under the CARES Act, and other discrete tax items resulting in net after tax
benefits. For the nine months ended November 30, 2019, the effective tax rate
reflected the impact of charges for goodwill and other impairments and severance
costs, portions of which are non-deductible for tax purposes, and after tax
costs of approximately $10.5 million due to discrete and federal and state tax
items.
Potential volatility in the effective tax rate from year to year may occur as
the Company is required each year to determine whether new information changes
the assessment of both the probability that a tax position will effectively be
sustained and the appropriateness of the amount of recognized benefit.
Net Loss
As a result of the factors described above, net loss for the three months ended
November 28, 2020 was $75.4 million, compared with net loss of $38.6 million for
the three months ended November 30, 2019. Net loss for the nine months ended
November 28, 2020 was $159.8 million, compared with net loss of $548.4 million
for the nine months ended November 30, 2019.
Transformation
The Company is executing on a comprehensive plan to transform its business and
position the Company for long-term success under the leadership of its new
President and CEO Mark Tritton, who joined the Company on November 4, 2019. Mr.
Tritton has been assessing the operations, portfolio, capabilities and culture
of the Company and is developing and implementing the initial stages of a
strategic plan designed to re-establish the Company's leading position as the
preferred omnichannel home destination, grounded in five key pillars: Product,
Price, Promise, Place and People. With these five pillars as its framework, and
a singular purpose to make it easy for customers to feel at home, the Company is
embracing a commitment to build and manage a modern, durable omnichannel model.
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Early actions include the extensive restructure of the Company's leadership
team. Interim leaders were appointed in merchandising, digital, marketing, owned
brands, legal and human resources. During fiscal 2020, the Company announced the
hiring of a new leadership team, consisting of the following:
•On March 4, 2020, Joe Hartsig joined the Company as Executive Vice President,
Chief Merchandising Officer of the Company and President of Harmon Stores Inc.;
•On May 4, 2020, Gustavo Arnal joined the Company as Executive Vice President,
Chief Financial Officer and Treasurer of the Company;
•On May 11, 2020, Rafeh Masood joined the Company as Executive Vice President,
Chief Digital Officer;
•On May 11, 2020, Gregg Melnick assumed the role of Executive Vice President,
Chief Stores Officer. Previously, Mr. Melnick served as the Company's interim
Chief Digital Officer;
•On May 18, 2020, John Hartmann joined the Company as Chief Operating Officer of
the Company and President, buybuy BABY;
•On May 18, 2020, Arlene Hong joined the Company as Executive Vice President,
Chief Legal Officer and Corporate Secretary;
•On May 26, 2020, Cindy Davis joined the Company as Executive Vice President,
Chief Brand Officer of the Company and President, Decorist; and
•On September 28, 2020, Lynda Markoe joined the Company as Executive Vice
President, Chief People and Culture Officer.
As discussed in "Overview" above, as part of its business transformation, the
Company is also pursuing deliberate actions as part of its restructuring program
to drive profit improvement over the next two-to-three years. The Company
expects to reinvest a portion of the expected cost savings into future growth
initiatives.

Liquidity and Capital Resources

The Company has been able to finance its operations, including its growth and acquisitions, substantially through internally generated funds. As previously described, the Company began temporary store closures in March 2020 and the majority of the Company's stores were temporarily closed during the first quarter 2020. Subsequently, the Company began a measured approach to re-opening its stores, subject to state and local regulations, and nearly all of the Company's stores have re-opened as of July 2020. During the first quarter of fiscal 2020, the Company elected to draw down the remaining $236.4 million of available funds under its $250 million revolving credit facility (the "Revolver"), which was refinanced with the Company's $850 million secured asset-based revolving credit facility entered into on June 19, 2020 (the "ABL Facility"). These borrowings were subsequently repaid during the second quarter of fiscal 2020. The new ABL Facility matures on June 19, 2023 and provides the Company with additional liquidity. The Company's ability to borrow under the ABL Facility is based upon a specified borrowing base consisting of a percentage of the Company's eligible inventory and credit card receivables as defined in the ABL Facility, net of applicable reserves (See "Long Term Debt," Note 11).

During fiscal 2020, the Company divested of One Kings Lane, PMall, CTS and Linen Holdings, generating aggregate net proceeds of $482.7 million, which will be used to reinvest in the Company's core business operations to drive growth, fund share repurchases, reduce the Company's outstanding debt, or some combination of these initiatives.

During the second quarter of fiscal 2020, the Company paid approximately $220.9 million to repurchase $300 million aggregate principal amount of its outstanding 4.915% Senior Notes due 2034 and 5.165% Senior Notes due 2044.

On October 28, 2020, the Company entered into an ASR Agreement with JPMorgan to repurchase $225.0 million of the Company's common stock. Pursuant to the ASR Agreement, the Company paid $225.0 million to JP Morgan and received an initial delivery of 4.5 million shares of common stock, which was accounted for as a treasury stock transaction. The final number of shares to be repurchased under the ASR agreement will be based on the average of the daily volume-weighted average price of common stock during the term of the ASR Agreement, less a discount. At final settlement, which is expected to occur during the Company's fiscal 2020 fourth quarter ending on February 27, 2021, JP Morgan may be required to deliver additional shares of common stock to the Company or, under certain circumstances, the Company may elect to either deliver shares or make a cash payment to JP Morgan. Subsequent to the end of the fiscal third quarter of 2020, on December 11, 2020, the Company's Board of Directors approved a new accelerated share repurchase program to repurchase an aggregate of $150 million of the Company's common stock, subject to market conditions, which is in addition to the $225.0 million accelerated share repurchase program announced in the third quarter of fiscal 2020, both of which are expected to be completed by the end of fiscal 2020.


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The Company ended the third quarter of fiscal 2020 in a strong cash position, which it anticipates maintaining, to provide the Company the flexibility to fund its ongoing initiatives and act upon other opportunities that may arise. As of November 28, 2020, the Company had approximately $1.5 billion in cash and investment securities, an increase of approximately $76.1 million compared with February 29, 2020. The Company believes that it can continue to finance its operations through existing and internally generated funds for the next twelve months. In addition, if necessary, the Company could borrow under its ABL Facility, subject to customary conditions, including no default, the accuracy of representations and warranties, and borrowing base availability. The ABL Facility contains an anti-cash hoarding provision which limits the availability of loans under the credit facility to $600 million (plus the amount of any incremental first-in-last-out loans) if, after giving effect to any borrowing and the application of proceeds thereof, the Company has greater than $100 million in unrestricted cash or cash equivalents in the aggregate as of the date of such borrowing. In addition, as a result of the COVID-19 pandemic, for fiscal 2020, the Company has and continues to take measures to preserve its liquidity, including the suspension of the payment of dividends; postponement of certain capital expenditures and, among other things, renegotiating payment terms for goods, services and rent, managing to lower inventory levels, and reducing discretionary spend such as business travel, advertising and expense associated with the maintenance of stores that were temporarily closed. Similar to other retailers, the Company withheld portions of and/or delayed payments to certain of its business partners as the Company seeks to renegotiate payment terms, in order to further maintain liquidity given the temporary store closures. In some instances, the renegotiations of lease terms have led to agreements with landlords for rent abatements or rental deferrals. Total payments withheld and/or delayed or deferred as of November 28, 2020 were approximately $36.2 million and are included in current liabilities. During the nine months ended November 28, 2020, the Company recognized reduced rent expense of $7.8 million related to rent abatement concessions. Additional negotiations of payment terms are still in process, and there can be no assurance that the Company will be able to successfully renegotiate payment terms with all such business partners, and the ultimate outcome of these activities including the responses of certain business partners are not yet known. The Company is also executing on its business transformation program, which is designed to improve its profitability and includes the planned closure of 200 mostly Bed Bath & Beyond stores under its store network optimization program and workforce reductions as part of its restructuring program.

Capital expenditures for fiscal 2020 are projected to be approximately $175 million related to essential capital expenditures to drive strategic growth plans, including investments in digital and BOPIS. In addition, the Company reviews its alternatives with respect to its capital structure on an ongoing basis. The Company's liquidity may continue to be negatively impacted by the uncertainty regarding the spread of COVID-19 and the timing of economic recovery.

Fiscal 2020 compared to Fiscal 2019

Net cash provided by operating activities for the nine months ended November 28, 2020 was $192.4 million, compared with $257.1 million in the corresponding period in fiscal 2019. The year-over-year decrease in cash provided by operating activities was primarily due to the net decrease in cash provided by components of working capital (primarily merchandise inventories and accounts payable, partially offset by other current assets and accrued expenses and other current liabilities). This decrease was partially offset by an increase in net earnings, adjusted for non-cash expenses.

Retail inventory, which includes inventory in the Company's distribution facilities for direct to customer shipments, was approximately $1.8 billion at November 28, 2020, a decrease of 12.7% compared to retail inventory at February 29, 2020. The Company continues to focus on its inventory optimization strategies.

Net cash provided by investing activities for the nine months ended November 28, 2020 was $751.9 million, compared with net cash provided by investing activities of $299.6 million in the corresponding period of fiscal 2019. For the nine months ended November 28, 2020, net cash provided by investing activities included $386.5 million of redemptions of investment securities and $482.7 million in proceeds from sale of businesses, partially offset by $117.3 million of capital expenditures. For the nine months ended November 30, 2019, net cash provided by investing activities was comprised of $488.0 million of redemptions of investment securities, net of purchases, partially offset by $188.4 million of capital expenditures.

Net cash used in financing activities for the nine months ended November 28, 2020 was $481.9 million, compared with net cash used in financing activities of $163.5 million in the corresponding period of fiscal 2019. The increase in net cash used in financing activities was primarily due to net debt repayments of $221.4 million, primarily associated with the repurchase of a portion of the outstanding senior notes during the second quarter of fiscal 2020 and a $132.6 million prepayment under the ASR Agreement, partially offset by lower dividend payments of $41.3 million.

Seasonality

The Company's business is subject to seasonal influences. Generally, its sales volumes are higher in the calendar months of August, November and December, and lower in February.



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Critical Accounting Policies

See "Critical Accounting Policies" under Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 2020 ("2019 Form 10-K"), filed with the Securities and Exchange Commission ("SEC").

Forward-Looking Statements

This Form 10-Q contains forward-looking statements, including, but not limited to, the Company's progress and anticipated progress towards its long-term objectives. Many of these forward-looking statements can be identified by use of words such as may, will, expect, anticipate, approximate, estimate, assume, continue, model, project, plan, goal, preliminary, and similar words and phrases, although the absence of those words does not necessarily mean that statements are not forward-looking. The Company's actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors. Such factors include, without limitation: general economic conditions including the housing market, a challenging overall macroeconomic environment and related changes in the retailing environment; risks associated with COVID-19 and the governmental responses to it, including its impacts across the Company's businesses on demand and operations, as well as on the operations of the Company's suppliers and other business partners, and the effectiveness of the Company's actions taken in response to these risks; consumer preferences, spending habits and adoption of new technologies; demographics and other macroeconomic factors that may impact the level of spending for the types of merchandise sold by the Company; civil disturbances and terrorist acts; unusual weather patterns and natural disasters; competition from existing and potential competitors across all channels; pricing pressures; liquidity; the ability to achieve anticipated cost savings, and to not exceed anticipated costs, associated with organizational changes and investments, including the Company's strategic restructuring program and store network optimization strategies; the ability to attract and retain qualified employees in all areas of the organization; the cost of labor, merchandise and other costs and expenses; potential supply chain disruption due to trade restrictions, and other factors such as natural disasters, pandemics, including the COVID-19 pandemic, political instability, labor disturbances, product recalls, financial or operational instability of suppliers or carriers, and other items; the ability to find suitable locations at acceptable occupancy costs and other terms to support the Company's plans for new stores; the ability to establish and profitably maintain the appropriate mix of digital and physical presence in the markets it serves; the ability to assess and implement technologies in support of the Company's development of its omnichannel capabilities; the ability to effectively and timely adjust the Company's plans in the face of the rapidly changing retail and economic environment, including in response to the COVID-19 pandemic; uncertainty in financial markets; volatility in the price of the Company's common stock and its effect, and the effect of other factors, including the COVID-19 pandemic, on the Company's capital allocation strategy; risks associated with the ability to achieve a successful outcome for its business concepts and to otherwise achieve its business strategies; the impact of intangible asset and other impairments; disruptions to the Company's information technology systems including but not limited to security breaches of systems protecting consumer and employee information or other types of cybercrimes or cybersecurity attacks; reputational risk arising from challenges to the Company's or a third party product or service supplier's compliance with various laws, regulations or standards, including those related to labor, health, safety, privacy or the environment; reputational risk arising from third-party merchandise or service vendor performance in direct home delivery or assembly of product for customers; changes to statutory, regulatory and legal requirements, including without limitation proposed changes affecting international trade; changes to, or new, tax laws or interpretation of existing tax laws; new, or developments in existing, litigation, claims or assessments; changes to, or new, accounting standards; and foreign currency exchange rate fluctuations. Except as required by law, the Company does not undertake any obligation to update its forward-looking statements.

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